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AP Microeconomics

Subjects : economics, ap
Instructions:
  • Answer 50 questions in 15 minutes.
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  • Match each statement with the correct term.
  • Don't refresh. All questions and answers are randomly picked and ordered every time you load a test.

This is a study tool. The 3 wrong answers for each question are randomly chosen from answers to other questions. So, you might find at times the answers obvious, but you will see it re-enforces your understanding as you take the test each time.
1. Characterized by many small price-taking firms producing a standardized product in an industry in which there are no barriers to entry or exit






2. Pm > MR = MC - which is not allocatively efficient and dead weight loss exists. Pm > ATC - which is not productively efficient. Profit > 0 so consumer surplus is transferred to the monopolist as profit






3. Consumer income - prices of substitute and complementary goods - consumer tastes and preferences - consumer speculation - and number of buyers in the market all influence demand






4. The rational decision maker chooses an action if MB = MC






5. The proportion of the tax paid by the consumers in the form of a higher price for the taxed good is greater if demand for the good is inelastic and supply is elastic






6. The downward part of the LRAC curve where LRAC falls as plan size increases. This is the result of specialization - lower cost of inputs - or other efficiencies of larger scale.






7. Models where firms agree to mutually improve their situation






8. Additional costs to society not captured by the market supply curve from the production of a good - result in a price that is too low and a market quantity that is too high. Resources are overallocated to the production of this good






9. Total product divided by labor employed. APL = TPL/L






10. TR = P * Qd






11. The upward part of the LRAC curve where LRAC rises as plant size increases. This is usually the result of the increased difficulty of managing larger firms - which results in lost efficiency and rising per unit costs.






12. A period of time long enough to alter the plant size. New firms can enter the industry and existing firms can liquidate and exit






13. Costs that do not vary with changes in short-run output. They must be paid even when output is zero.






14. The change in total product resulting from a change in the labor input. MPL = dTPL/dL - or the slope of total product






15. The combination of labor and capital that minimizes total costs for a given production rate. Hire L and K so that MPL / PL = MPK / PK or MPL/MPK = PL/PK






16. Excess supply; exists at a market price when the quantity supplied exceeds the quantity demanded.






17. Production inputs that cannot be changed in the short run. Usually this is the plant size or capital






18. The additional benefit received from the consumption of the next unit of a good or service






19. The total quantity - or total output of a good produced at each quantity of labor employed






20. Entry of new firms shifts the cost curves for all firms downward






21. Costs of inputs - technology and productivity - taxes/subsidies - producer speculation - price of other goods that could be produced - and number of sellers all influence supply






22. Ed < 1






23. Production of maximum output for a given level of technology and resources. All points on the PPF are productively efficient






24. Costs that change with the level of output. If output is zero - so are TVCs.






25. Total revenue rises with a price increase if demand is price inelastic and falls with a price increase if demand is price elastic






26. Ex -y = (%dQd good X) / (%d Price Y). If Ex -y > 0 - goods X and Y are substitutes. If Ex -y < 0 - goods X and Y are complementary






27. Additional benefits to society not captured by the market demand curve from the production of a good - result in a price that is too high and a market quantity that is too low. Resources are underallocated to the production of this good






28. The output where ATC is minimized and economic profit is zero






29. 0 < Ei < 1






30. Es = (%dQs) / (%dPrice)






31. MUx / Px = MUy/Py or MUx/MUy = Px/Py






32. Holding all else equal - when the price of a good rises - consumers decrease their quantity demanded for that good






33. Indirect - non-purchased - or opportunity costs of resources provided by the entrepreneur






34. ATC = TC/Q = AFC + AVC






35. The change in quantity demanded that results from a change in the consumer's purchasing power (or real income)






36. The difference between the monopolistic competition output Qmc and the output at minimum ATC. Excess capacity is underused plant and equipment






37. Entry (or exit) of firms does not shift the cost curves of firms in the industry






38. Exists when the production of a good imposes disutility upon third parties not directly involved in the consumption or production of the good






39. Occurs when an economy's production possibilities increase. This can be a result of more resources - better resources - or improvements in technology.






40. The philosophy that a citizen should receive a share of economic resources proportional to the marginal revenue product of his or her productivity






41. Measures the cost the firm incurs from using an additional unit of input. In a perfectly competitive labor market - MRC = Wage. In a monopsony labor market - the MRC > Wage






42. The practice of selling essentially the same good to different groups of consumers at different prices






43. The ability to set the price above the perfectly competitive level






44. Exists when the production of a good creates utility for third parties not directly involved in the consumption of production of the good






45. Factors of production - 4 categories: labor - physical capital - land/natural resources - and entrepreneurial ability






46. The least competitive market structure - characterized by a single producer - with no close substitutes - barriers to entry - and price making power






47. The difference between your willingness to pay and the price you actually pay. It is the area below the demand curve and above the price






48. The most desirable alternative given up as the result of a decision






49. Production of the combination of goods and services that provides the most net benefit to society. The optimal quantity of a good is achieved when the MB = MC of the next unit and only occurs at one point on the PPF






50. Labor demand for the firm is MRPL curve. The labor demanded for the entire market DL = ?MRPL of all firms